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Value conscious investment legend Warren Buffett would be proud of the listed investment company’s rationale for not charging any base or performance management fees.

With two-thirds of Global Masters’ circa $18m of investments tied up in Buffett’s investment vehicle Berkshire Hathaway, the LIC serves as a local conduit for investors who can’t afford to shell out $US284,000 ($366,000) for a single Berkshire share.

“There is no logical reason why we should be charging a management fee if we are not managing anything,” Global managing director Manny Pohl says.

“When you have two passive investments it’s not right to be charging a management fee. Mr Buffett does that for us.”

The second investment refers to Global’s allocation of 8.5% of its funds to the London Stock Exchange listed Athelney Trust, which invests in undervalued UK stocks with a market cap of less than 300 million quid.

To keep the lights on absent those management fees, Global Masters has also invested 12 per cent of its portfolio in another Pohl-linked lic, Flagship Investments.

Unlike Berkshire Hathaway, Flagship pays dividends from its portfolio of Australian shares and these flows defray the incremental costs of running Global (such as listing fees).

Global Masters has just completed a $4.28m capital raising, offering 2.14m shares in a one-for- four rights offer at $2 apiece. The funds won’t be ploughed into more Berkshire shares and may be used for more active investments -in which case the fund may eventually introduce a management fee.

Pohl hasn’t exactly lost faith in Berkshire shares, which have gained 32 per cent over the last year and 123 per cent over five years.

(The stock also zoomed 7.9 per cent in the September quarter on the back of a buoyant US market).

But he gently notes that at the age of 87, Buffett is no spring chicken while his vice chair Charlie Munger is 93.

He’s not implying the sprightly duo aren’t up to the task, but such are market perceptions that when they fall off their perches there’s likely to be pressure on Berkshire shares.

Global Masters net tangible asset (nta) value rose 18 per cent in the 12 months to September 30, to $2.06 (pre tax obligations on the sale of assets).

Unusually for a small lic, Global shares are trading at a 5 per cent premium to nta.

Despite their fee-free ride, Global investors last year vented their ire at the level of director salaries, voting down the remuneration report under the ‘three strikes’ rule.

A perplexed Pohl argues that at an average $42,000 across three directors, these stipends were not exactly excessive. In any event, the board did not incur a ‘second strike’ at this year’s AGM held last Friday.

As for the famed Buffett annual jamboree, Pohl has attended two and found them to be “illuminating and interesting”. This year’s meet, held in front of 40,000 in Buffett’s home town of Nebraska in May, lasted for eight hours.

But the AGM – dubbed the Woodstock for investors – is also in danger of becoming a sideshow of quips and bon mots for Middle America.

Pohl says the Munger- chaired Westco Financial offered a more concise and useful AGM when it was 80 per cent owned by Berkshire. Sadly, the AGMs were abolished after Berkshire took full control in 2011.

Many readers will remember Boreham as author of the Criterion column in The Australian newspaper, for well over a decade. He also has more than three decades' experience of business reporting across three major publications.

Tim Boreham has now joined Independent Investment Research and is proud to present The New Criterion, which will honour the style and purpose of the old column. These were based on covering largely ignored small to mid cap stocks in an accessible and entertaining manner for both retail and professional investors.

Disclaimer: The author nor Independent Investment Research have received a fee or any kind of inducement for this article. The New Criterion is not intended as specific investment advice and readers should contact a licensed financial adviser.